The crude oil “supply gap” risk

A big question among oil experts these days is whether today’s worldwide investments in new supplies are too low to avoid risk of a “supply gap” opening up in the early 2020s as demand grows and existing fields decline.

The big picture: Two competing views presented this week offer a pessimistic and optimistic take on the situation, taking on opposite sides of the investment debate.

Fresh warning: The head of one of the world’s largest oil-and-gas companies says the surge in U.S. crude production is not enough to prevent problems from emerging in a few years.

“Even if the U.S. shale oil is dynamic, we do not invest enough in this industry,” Total CEO Patrick Pouyanné says on the new episode of the Columbia Energy Exchange podcast.

He says under-investment in recent years is still a problem in 2018.

“Post-2020, the price will go high, because we will have a lack of capacity, and even with the shale oil dynamic, the global production of oil will be not enough. We are under-investing,” Pouyanné says.

Don’t worry so much: A research note this week from Barclays analysts, however, suggests that these types of concerns are likely misplaced.

They argue that even with declines from mature fields, there has been enough new supply coming online from 2011–2017 even outside OPEC and U.S. shale to nearly offset it. And they don’t see that changing.

“In the next couple of years, projects that have already received a green light are coming online and will further mitigate those declines. That means that the ‘mature base’ of non-OPEC non-US supply is flat from now through at least 2022, and it leaves OPEC liquids, US tight oil, Canadian oil sands, and non-crude liquids available to meet incremental demand growth,” they write.